Our Voice: Public employee pay, pension tension is destined to erupt in months to come

The argument shaping up in the Saginaw School District over employee costs hits on the high price of pensions, but manages to still miss the point.

Public employee pensions, among other compensation costs such as salaries and health care, are killing public budgets.

This is a problem for local school and government budgets all over Michigan, and an issue that is building pressure like a volcano about to erupt in the state Capitol of Lansing.

Saginaw Schools, for example, face a projected $757,876 budget deficit by the end of the fiscal year on June 30.

School officials say they’ll try to balance their budget by cutting costs without laying off employees. That’ll be a neat trick if they can pull it off without cutting into employee costs.

Enter Mary Ann Dupuis, the president of the 520-member Saginaw Education Association, the district’s teachers union. She has warned the school board that privatizing some district jobs could actually cost the district more money. Fewer public employees with benefits paying into the Michigan Public School Employees Retirement System would mean the district would have to kick more money into that state-run pension plan to cover guaranteed pension benefits.

That could be, we agree.

But that’s if the MPERS plan remains unchanged.

Which is inadvisable. And, frankly, unlikely.

Public school employees enjoy a beefy pension plan unlike those for the state’s employees, and utterly alien these days to most private-sector workers.

The state’s other retirement plan, the Michigan State Employees Retirement System, was reformed at the Legislature in 1997 and stopped putting new state of Michigan employees on defined-pension-benefit programs. Instead, they enroll in a 401(k) plan, much like many private sector workers do now. About half the state’s 50,000 workers are now enrolled in 401(k)s and half still will get defined benefits when they retire.

The main problem with defined benefits is that, come hell or high water — both of which we’ve seen in swamped budgets caused by the Great Recession — the plan still owes workers a set amount. And, often cost-of-living increases.

It’s an unsustainable model of rising costs for employers in a time of fallen revenue. In Saginaw Schools, as in other statewide, about $1,000 per student is spent each year on teacher pensions. The amount is likely to grow as more teachers retire.

As happened in the private sector in recent years when companies cut costs to stay in business, it’s realistic to expect defined-benefit public pensions to go the way of the do-do bird — extinct.

And that likely won’t be the end of the pain for school employees — or for any public employees. Municipalities already can’t afford their fire and police services, among others. Many are demanding pay and benefit cuts from public unions — or face layoffs.

In Lansing, it’s no secret that Gov. Rick Snyder and his allies are building a case to drop public employee pay and benefits down to the levels where private-sector workers now scrabble for a living.

The bald fact is that now, without reductions in the costs of public employment, taxpayers who have been clobbered with pay and benefits cuts are asked to keep pumping money into government so public employees don’t have to suffer the same economic pain.

On Monday, Snyder released this tickler, part of his Citizen’s Guide to Michigan’s Fiscal Health: Average state employee total compensation of pay and benefits, was $85,076 in 2009, for private-sector employees it was $39,986.

For those who say it’s comparing apples to oranges, we say the two-to-one disparity in the guide at the very least points to some imbalance that should be adjusted to a level that Michigan taxpayers can better afford.

So when teacher unions argue that their pension costs preclude cost-cutting that districts might pursue, they’re only partly right.

They are assuming that the pay, and the benefits, of all school teachers are destined to remain unchanged.

It’s an assumption that will be tested for all public employees, and probably bested, in the months to come.